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Does market power discipline CEO power? An agency perspective
Author(s) -
Jaroenjitrkam Anutchanat,
Yu ChiaFeng Jeffrey,
Zurbruegg Ralf
Publication year - 2020
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12240
Subject(s) - luck , chief executive officer , corporate governance , agency (philosophy) , business , market power , power (physics) , product market , competition (biology) , industrial organization , perspective (graphical) , executive compensation , accounting , economics , market economy , management , finance , incentive , ecology , philosophy , physics , theology , epistemology , quantum mechanics , artificial intelligence , computer science , biology , monopoly
Abstract We examine how product market competition (PMC) shapes chief executive officer's (CEO) power. Using various measures to capture both PMC and CEO power, our analyses, which include a quasi‐natural experiment, find evidence that CEOs have less power when the product market is more competitive. Furthermore, the impact of PMC on CEO power is more pronounced for firms with entrenched management, lower CEO ownership, lower analyst coverage, and for firms experiencing good ‘luck’ (windfall performance). Our results suggest that market power can act as a substitute for corporate governance in disciplining CEO power, particularly when prone to agency problems.